Thailand: PTTEP sets sights on M&A feasibility under stable oil prices

Thailand: PTTEP sets sights on M&A feasibility under stable oil prices

PTT Exploration and Production Plc, (PTTEP), the only SET-listed upstream
petroleum firm, says higher and more stable global oil prices will make it
easier for the company to acquire or merge with other petroleum exploration
and production companies.

Wirat Uanarumit, PTT director and board member, said PTTEP plans to raise
its proven petroleum reserves by 125% from the average level of four years
to 10 years.

PTTEP's mergers and acquisitions plans are aimed at maintaining a production
level of about 320,000 barrels of oil equivalent per day and rise to 600,000
boed by 2025.

"Oil prices have become quite stable and major exploration and production
(E&P) companies are expected to re-adjust their asset portfolios and are
mulling plans to sell some assets in Asia, especially those companies whose
E&P activities stopped for a few years when oil prices fell below US$50 a
barrel," said Mr Wirat.

The collapse in oil prices to around $30 a barrel forced E&P companies to
stop drilling for petroleum and pushed down the value of E&P assets, making
them no longer worth investing in, nor worth selling. However, rebounding
oil prices could push up E&P asset prices, and encourage E&P companies to
sell them off.

PTTEP reports its proven petroleum reserves will decline sharply to 263,000
boed in 2021 from 312,000 boed if there are no new mergers and acquisitions
(M&As) to help increase reserves or if the Bongkot gasfield in the Gulf of
Thailand is not granted a new concession.

Mr Wirat, who is also the chief operating officer of upstream petroleum and
gas business at national oil and gas conglomerate PTT Plc, said PTT and
PTTEP are considering setting up a joint venture with a massive capital
expenditure to develop a liquefaction plant adjacent to the Mozambique
Rovuma Offshore Area 1 to produce liquefied natural gas (LNG).

Details and total value of the project are due to be finalised by early next
year, he said.

The Rovuma Area 1 is estimated to have proven petroleum reserves of about 65
trillion cubic feet and shareholders of the development consortium are due
to make a final investment decision by the end of the year on when
production would start, he added.

Pannalin Mahawongtikul, PTTEP's executive vice-president for finance and
accounting, said as of the end of last year the company had cash on hand of
about $4 billion, which is ready to be used for M&As over the next few
years.

The cash is in addition to its five-year capital expenditure (2017-21) of
$8.84 billion baht, she said.

In order to prevent depletion of the company's proven petroleum reserves in
less than a year, Ms Pannalin said PTTEP plans to accelerate the
developments of Mozambique's Rovuma, Algeria's Hassi Bir Rekaiz and Ubon
Field in the Gulf of Thailand.

The Ubon field will produce another 25,000-30,000 boed, while Rovuma could
produce another 300,000 boed and Hassi Bir Rekaiz could produce another
50,000 boed, she said.

Jakapong Chawangsri, a stock analyst at Kasikorn Securities, estimated that
at least one deal from the four deals that PTTEP is in talks with E&P firms
could be sealed by the middle of this year.

He said the project most likely to manifest is the Yadana gas field in
Myanmar and the SK 316 offshore gas field in Malaysia.

PTTEP recently failed to acquire Royal Dutch Shell's 22.22% shares in KUFPEC
Thailand Holding, which operates the Erawan gasfield in the Gulf of
Thailand.

PTTEP shares closed yesterday on the Stock Exchange of Thailand at 93 baht,
up 75 satang, in trade worth 895 million baht.

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Link to Original Article:
http://www.bangkokpost.com/business/news/1224260/pttep-sets-sights-on-ma-fea
sibility-under-stable-oil-prices

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com